Tag: Inflation

The Bank of Canada is holding its benchmark interest rate unchanged at 0.5 per cent and providing a deeper concern on the risks associated with the big economic changes expected to come out of a Trump presidency. On one side central bank’s keeping on with the same interest rate shows improvement signs of Canadian economy but it also warn uncertainty attached due to potential policy changes expected from the United States, after all we are the largest trading partner.

Following is the news article from Mortgage Intelligence is especially selected for the blog readers that are looking to get especially a mortgage in 2017 at the same lower rates, although, it’s been expected to stay benchmark interest rates low in Canada till 2020 with a possibility of further cut down in rates if the Canadian economy continues to contract:

The Bank of Canada announced today that it is holding the benchmark interest rate unchanged at 0.5%, noting that “growth in the 3rd quarter rebounded strongly, but more moderate growth is anticipated in the 4th” and that “a significant amount of economic slack remains in Canada.” Bond yields have crept higher since the U.S. election, reflecting “market anticipation of fiscal expansion in a U.S. economy that is near full capacity.” Higher bond yields have caused our fixed mortgage rates to rise in conjunction.

This fall, the Ministry of Finance introduced four new mortgage tightening measures intended to cool the housing markets (aimed primarily at Vancouver and Toronto), reduce foreign investor home flipping, and control the levels of Canadian household debt. The Ministry also has introduced risk sharing on mortgages for the Chartered Banks which puts upward pressure on mortgage rates as lenders need to set aside higher levels of capital for certain types of funds. More than half of Canada’s $1.4 trillion home loan market is made up of insured mortgages with all of the risk on the Canadian taxpayer – and that is now changing. On November 1, one of the Chartered Banks’ mortgage prime rate for variable mortgages jumped 0.15 points to 2.85 per cent, and it’s expected others may follow.

The Central Bank has predicted throughout 2016 that it expects oil prices and the Canadian dollar to stay close to the $49 US for a barrel of crude (currently around $51.85 US per barrel at December 5th), and 77 cents US for the Canadian dollar (currently at 75 cents US at December 5th). Low interest rates help keep the Canadian dollar low which in turn aids our export market, however global demand for our products has stalled. The European Union members’ debt crisis, global oil-price collapse, and Brexit have undermined markets and consumer confidence. In addition, the uncertainty over our trade position with the U.S. as a result of the U.S. election is expected to delay capital spending and business investment in Canada.

We expect to see interest rates staying low in Canada well into 2020 and the benchmark interest rate can be cut further if the Canadian economy continues to contract. The Bank of Canada believes it must continue its monetary policy of ultra-low rates to control inflation, stimulate other sectors of the economy besides housing and spur our Canadian export market.

Professional mortgage advice has never been more important. Get in touch today for expert mortgage advice tailored to your situation and local market conditions, and access to as many options as possible if you are planning a purchase, or want to use today’s low rates to refinance and save thousands by moving your high interest debt to your low-rate mortgage.

Bank Of Canada holds benchmark rate steady at 0.5 per cent in 2017; lets see what unknown big economic changes of Trump presidency may bring any change to our financial forecast. Hope for the best, good luck.

According to the last week announcement, The Bank of Canada has kept holding its key interest rate steady for the seventh time, there are things that can affect the ongoing straight and unchanged rates like, as you know that “the economy’s structural adjustment to the oil price shock continues,” and the wildfires in Alberta will cause a weaker than predicted second quarter, although it is expected that the Canadian economy will rebound in the third quarter when oil production will resumes and reconstruction begins.

While looking outside of Canada as justification; it is expected that the growth in the global economy is evolving in due course while the American economy is returning to solid growth. Canadian inflation is evolving as anticipated. In the light of above, the Bank of Canada judges that the current stance of monetary policy is appropriate and to keep hold on the key rate.

All that means, you are enjoying stable interest rates for the seventh time, it will not make any effect on interest rates over your personal loans and credit products. If you’re looking to get mortgage loan, you should contact your favorite mortgage lender or broker to receive their short-term rate promotions that are sometimes not posted online due to short term availability, the best way to keep your eye on the best rate specials is the newsletter, so you should try to subscribe yourself with your desired mortgage company to keep receiving updated rates, news and offers.

Moreover, great news for all those people having a variable-rate mortgage that are looking mortgage renewal, need to consolidate debt at the lowest-cost funds and, or willing to get a new mortgage; July 13, 2016 is the next rate-setting date.

When the bank of Canada lowers the overnight loans rate the Canadian dollar depreciated against U.S. and other major counterparts, savings accounts and bonds yields plunged, effected stock market and the commercial banks cut prime lending rate to match bank of Canada move; it all happened unpredicted!

In a surprise move, the Bank of Canada announced an overnight rate update on Wednesday, 21st January, 2015 that it is lowering its key interest rate down to 0.75 per cent in order to keep balance against the risks to the economic growth, inflation and housing market downturn posed by the sharp drop in oil prices. This is the first time the overnight interest rate has changed since September 2010.

How the Bank of Canada’s interest cut will affect loans and mortgage rates? The cutting in rate would affect in lower interest rates for consumers that hold variable rate mortgages, lines of credit and other loans that based on prime rates besides it will make cheaper for companies to borrow money to grow their businesses; let’s see if banks lower their prime rates.

Declining in rates will not bring any benefits for credit cards consumers and borrowers of fixed-rate mortgages and on auto loans that’s a fixed-rate loan. Moreover, interest on things like savings accounts, straight GIC and government debt will also comes down but at the same time it does provide incentives for people to invest in other types of assets that have higher returns.

Canadians taking out variable-rate mortgages, new fixed-rate mortgage, renewing their old mortgages right now, or want to consolidate debt at the lowest cost funds could see rates edge down.

The sudden rate cut announcement become a shocking news; there were many economists predicting rate hold and or interest rate hike for the future but none of them were expecting a rate cut, beside The Canadian dollar fell down against a variety of major currencies after that. The Bank of Canada believes low oil prices will bring overall negative impact on the Canadian economy.

Here’s the official statement concerning lowers overnight lending rate issued by the Bank of Canada:

Bank of Canada lowers overnight rate target to 3/4 per cent

Press Release: Ottawa, 21 January 2015

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.

Inflation has remained close to the 2 per cent target in recent quarters. Core inflation has been temporarily boosted by sector-specific factors and the pass-through effects of the lower Canadian dollar, which are offsetting disinflationary pressures from slack in the economy and competition in the retail sector. Total CPI inflation is starting to reflect the fall in oil prices.

Oil’s sharp decline in the past six months is expected to boost global economic growth, especially in the United States, while widening the divergences among economies. Persistent headwinds from deleveraging and lingering uncertainty will influence the extent to which some oil-importing countries benefit from lower prices. The Bank’s base-case projection assumes oil prices around US$60 per barrel. Prices are currently lower but our belief is that prices over the medium term are likely to be higher.

The oil price shock is occurring against a backdrop of solid and more broadly-based growth in Canada in recent quarters. Outside the energy sector, we are beginning to see the anticipated sequence of increased foreign demand, stronger exports, improved business confidence and investment, and employment growth. However, there is considerable uncertainty about the speed with which this sequence will evolve and how it will be affected by the drop in oil prices. Business investment in the energy-producing sector will decline. Canada’s weaker terms of trade will have an adverse impact on incomes and wealth, reducing domestic demand growth.

Although there is considerable uncertainty around the outlook, the Bank is projecting real GDP growth will slow to about 1 1/2 per cent and the output gap to widen in the first half of 2015. The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response. The Bank expects Canada’s economy to gradually strengthen in the second half of this year, with real GDP growth averaging 2.1 per cent in 2015 and 2.4 per cent in 2016. The economy is expected to return to full capacity around the end of 2016, a little later than was expected in October.

Weaker oil prices will pull down the inflation profile. Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year. Underlying inflation will ease in the near term but then return gradually to 2 per cent over the projection horizon.

The oil price shock increases both downside risks to the inflation profile and financial stability risks. The Bank’s policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projection horizon.

http://www.bankofcanada.ca/2015/01/fad-press-release-2015-01-21/

The next scheduled rate-setting date is March 4th, 2015. Moreover, Monetary Policy Report will be published on April 15th, 2015 that will reflect the next full update of the BoC’s outlook for the economy and inflation, including risks to the projection.

When the bank of Canada lowers the overnight loans rate last Wednesday, there was great expectation that all the banks and lenders would lower their prime rate subsequently; Royal Bank of Canada was the first major bank that reduced its prime rate from 3% to 2.85% and then Bank of Montreal, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and National Bank of Canada followed the RBC to offer 15 basis point cuts on their rates. Market felt surprised because 15 basis-point cut from these Canadian largest banks seem unmatched in reference to the Bank of Canada’s 25 basis-point reduction. Anyway, if your favorite banks or lenders have not lower their rates now, don’t worry, it will come down by market pressure for consumers soon.

OTTAWA July 15, Bank of Canada warns of inflation and slow growth that’s why bank holds steady on key interest rate that is 3%. Anyway, The combination of slow growth and high inflation is a difficult puzzle for policy makers because battling one ailment exacerbates the other.

There are various schools of thought who have been predicting on this critical issue but it’ll be normal soon, because most of the problems are seem external rather than internal economical situations. Anyhow, most of the economists already expected the same solution from the Bank of Canada like bank left its key interest rate unchanged.

In accordance with the Bank’s announcement, lending institutions in Canada are expected to keep their prime-lending rate unchanged and steady too. The prime rate used by lenders is the base rate that they use in pricing loans to their most creditworthy customers. Variable-rate mortgages, variable-rate credit cards, and home equity lines of credit are typically linked to a lender’s prime rate. Anyhow, Pricing for fixed-rate mortgages is not directly affected by bank’s decision.